Transactions of a company involving external sources of funding are referred to as:

11. Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities? 

A. $55,000.
B. $30,000.
C. $13,000.
D. $7,000.

Assets ($55,000) = Liabilities + Stockholders' Equity ($25,000).

12. Transactions of a company involving external sources of funding are referred to as: 

A. Investing activities.
B. Financing activities.
C. External activities.
D. Operating activities.

13. Transactions of a company that include the purchase and sale of long-term productive assets are referred to as: 
A. Investing activities.
B. Financing activities.
C. Expenditure activities.
D. Operating activities.

14. McGill purchases additional office equipment to better serves its customers. This purchase is classified as what type of activity? 

A. Company activity.
B. Financing activity.
C. Investing activity.
D. Operating activity. 

15. Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: 

A. Investing activities.
B. Management activities.
C. Operating activities.
D. Financing activities.

16. Stimpleton Company engages in the following cash payments:

 

What is the total amount of cash paid for operating activities?
A. $6,000.
B. $2,000.
C. $7,000.
D. $1,500.

$500 + $1,000 = $1,500.

17. The form of business organization that is legally separate from its owners is a:
A. Partnership.
B. Sole proprietorship.
C. Corporation.
D. Separation entity.

18. Which business form has the advantage of limited liability?
A. Corporation.
B. Sole proprietorship.
C. Partnership.
D. All business forms share equal limited liability.

19. Limited liability means:
A. Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket.
B. Liabilities of a company cannot exceed its assets.
C. Companies are not allowed to borrow unless they are profitable.
D. Companies are less likely to be sued if they are formed as a corporation.

 

20. One disadvantage of the corporate form of business is:
A. Limited liability.
B. Access to more capital.
C. Smaller in size.
D. Double taxation.